Netherlands - Economic forecast summary (November 2017)

GDP growth is projected to remain strong and broad-based in 2018 and 2019. Private consumption growth will peak in 2018, reflecting a strong labour market and a looser fiscal stance, before moderating in 2019. Growth in business investment should be vibrant, driven by improved economic sentiment and solid external demand. Wage growth and inflation are projected to rise gradually. The current account surplus is set to ease gradually but remain at a high level.

Accommodative euro area monetary policy will continue to support demand. Fiscal measures outlined in the recent government coalition agreement will also be supportive, especially in 2018. To ensure more inclusive growth, labour market reforms should make it easier for workers to attain good quality jobs. Avenues to reduce reliance on non-standard jobs include lowering the cap on severance payments and ensuring that the dismissal system works more efficiently. Improving credit flow to SMEs and increasing public spending on R&D would lead to higher rates of investment and help to reduce one of the largest current account surpluses in the euro area.

House prices have recovered and in major cities have surpassed the level reached before the global financial crisis. High levels of mortgage debt make households vulnerable to decreases in house prices. The reduction in the maximum loan-to-value ratio for new mortgages and the lowering of mortgage interest relief should proceed at a faster pace than planned to reduce fragilities. Easing the strict regulation of the private rental market would improve housing supply and damp excessive house price growth.